April 17 (Bloomberg) -- The Greek government’s focus on
startup companies won’t be enough to turn the tide on a job
market in which more than one in four Greeks are without work,
startup leaders in the country say.

Greece needs small companies specializing in the “new
economy” to help spark growth, Prime Minister Antonis Samaras
said last week at a startup industry event in Athens he attended
with German Chancellor Angela Merkel.

“Startups do create jobs and revenue for the country, and
act as a positive role model, especially for the young,” Haris
Makryniotis, managing director of Endeavor Greece, said in an
interview in Athens. While the focus on startups is good news,
“we can’t expect these companies to be enough alone to generate
the number of jobs needed in Greece,” he said. New York-based
Endeavor Global Inc. is a non-profit organization that backs
“high-potential” entrepreneurs.

Greece has lost a quarter of its economic output during a
six-year recession, under the weight of austerity measures that
have led to an unemployment rate of over 26 percent. That figure
rises to more than 56 percent for Greeks age 15 to 24. The value
of Greece’s economic output fell 40 billion euros ($55 billion)
from 2010 to 2013, according to the country’s statistical
authority.

Greek startups employ about 1,500 people in a range of
businesses from taxi-finder applications to social networking to
souvlaki takeout operations and city-center cupcake shops. The
number of new startups reached 144 in 2013, compared with 65 in
2012 and 16 in 2010. Thirty of the new companies attracted 42
million euros of investment in 2013 compared with a total of
500,000 euros in 2010, according to Endeavor.

Chance to Grow

Around 15 percent of these companies have a good chance of
growing into bigger firms, Makryniotis said, calling that a good
performance “but not enough, and we shouldn’t put the burden on
them to solve the problem.”

While increased focus on the industry is a good sign, “the
negative side is this sort of obsession we have with startups,”
said Emilios Markou, co-founder and executive director of Hellas
Direct, an online car insurer. “Even if we had a Silicon
Valley, which we don’t, we wouldn’t suddenly see 200 million
euros-worth of GDP from a bunch of guys.”

Hellas Direct, which began operations in 2012, has raised
12 million euros from investors in the US and the U.K., as well
as from so-called angel investors. Hellas Direct employs 35
people in Athens, Cyprus and London and has a strategic
partnership with Germany’s Munich Re.

‘Tough Times’

“It’s premature and over-hyped to say startups are the
future of Greece and will turn the economy around,” said Nikos
Moraitakis, chief executive officer of Workable, a startup that
makes recruitment software solutions for small and medium-sized
companies. “There’s an eagerness to overplay positive stories
about Greece after a period of such tough times.”

Workable, which has 18 employees in Athens and two in
London, raised $950,000 last year from the Jeremie Openfund II
and private investors and a further $1.5 million in March from
Greylock IL, an affiliate fund of Greylock Partners.
“The challenge in Greece over the next few years is for
startups that have already proven themselves to get bigger
amounts of funding, say around 5 million euros,” Moraitakis
said.

The startup industry, while still small, is capable of
creating benefits for Greece’s economy, said entrepreneur Alexis
Christodoulou. “The startup ecosystem is like a pyramid, the
higher the top, the bigger the base,” said Christodoulou, who
together with Grigoris Zontanos founded Locish, which is
registered in San Francisco. Startups “have the capacity to
take the Greek economy a little higher,” Christodoulou said.

US Funding

Locish in March got 820,000 euros in funding from a US
venture led by Odyssey Jeremy Partners to develop a mobile
application that uses social networking to offer real-time
recommendations and directions.

Antonios Fiorakis, co-founder and chief executive officer
of Incrediblue, a community marketplace for boat rentals, said
that while the number of startup jobs in Greece is not
significant, the industry’s impact shouldn’t be underestimated.
“In a country with 1.3 million unemployed, the few hundred
employees that startups hired last year might seem like a drop
in the ocean,” Fiorakis said. “In reality though, these people
are highly skilled and motivated and can make a big impact on
every company’s growth, and that will result in more jobs.”

Incrediblue, founded in 2012, raised 600,000 euros last
year and has grown from three co-founders to a team of 14. If
the government backs its rhetoric with moves like lower social
security costs, firms like Incrediblue could hire more workers,
Fiorakis said. “Entrepreneurship is the solution to
unemployment.”